Scrapping of wind renewables subsidy condemned as ‘irrational’

5pm update: Renewables experts joined the Scottish government today in condemning the UK energy department for ending subsidies to onshore wind projects.

The decision had been expected although the renewables obligation will be withdrawn next April, a year earlier than planned.

Niall Stuart, chief executive of lobby group Scottish Renewables, said the decision will “undermine investment”, put jobs at risk, and potentially threaten offshore wind projects. He said it could cost the economy £3 billion in lost investment.

Scottish energy minister Fergus Ewing said it would have a disproportionate impact on Scotland because it has 70% of all onshore wind farms in the UK. He said Holyrood would consider calling a Judicial Review.

Responding to a threat of legal action, Amber Rudd, the UK Energy and Climate Secretary said: “It would be unwelcome but we will cross that bridge when we come to it.” She said the UK needed a “balanced” energy policy and would continue to consult with the Scottish Government.

“I understand he [Mr Ewing] doesn’t like the result but I will engage with him,” she said.

Mr Ewing said the decision was “irrational” as it could force up the cost of electricity for consumers because offshore wind farms are more expensive and require bigger subsidies.

DECC will give a period of grace expiring next year for plans in the pipeline, but about 3,000 wind turbines are awaiting planning permission and this announcement could jeopardise those plans.

Mr Ewing said: “The decision by the UK Government to end the Renewables Obligation next year is deeply regrettable and will have a disproportionate impact on Scotland as around 70 per cent of onshore wind projects in the UK planning system are here,” he said.

“This announcement goes further than what had been previously indicated. It is not the scrapping of a ‘new’ subsidy that was promised but a reduction of an existing regime – and one under which companies and communities have already planned investment.

“Wind is already the lowest cost of all low carbon options, as well the vital contribution it makes towards tackling climate change, which means it should be the last one to be scrapped, curtailed or restricted.”

Mr Ewing said the UK Government “has ignored the concerns of businesses and organisations who are integral to the future energy security of both Scotland and the UK, as well as to environmental organisations who recognise the importance of renewable energy in helping reduce emissions”.

He accused DECC of placing at risk a “huge investment pipeline” which had been pledged in good faith by developers based on statements from the UK Government.

He said the decision will cause uncertainty for investors, not just in onshore but across the renewables sector as a whole.

“Moreover, the decision will prevent onshore schemes proceeding whilst offshore wind will go ahead despite receiving far more generous subsidies. This, the industry claim, will lead to extra costs for consumers of possibly around £2-3 billion.; and must be irrational in that respect.

“We have warned the UK Government that the decision, which appears irrational, may well be the subject of a Judicial Review.

“The Scottish Government remains ambitious for the renewable energy industry and aims to maximise the vital contribution it makes towards tackling climate change. We will continue to work together with the industry as we continue to support the growth of renewables in Scotland.”

Scottish Renewables says decision is setback

Mr Stuart of Scottish Renewables said Scotland could lose £3 billion of investment and described the decision as “neither fair nor reasonable”.

He said it was “bad for jobs, bad for investment and can only hinder Scotland and the UK’s efforts to meet binding climate change targets”.

He added: “Scottish Renewables completely rejects the UK Government’s rationale for cutting support for onshore wind.

“A recent report by the UK Government estimated that there are 5,400 jobs in the onshore wind sector in Scotland, and many of these could now be at risk. Early closure of the Renewables Obligation will also serve to damage investor confidence, not only in the onshore wind industry, but in the wider UK energy sector.”

Mr Stuart, who represents more than 300 organisations in Scotland’s renewables industry, said that ending the Renewables Obligation would effectively amount to a retrospective act from the Government.

“Onshore wind is the cheapest form of renewable electricity we can deploy at scale, so removing financial support completely undermines the goal of cutting carbon emissions as cost-effectively as possible, and actually risks increasing consumer bills.”

Katja Hall, CBI Deputy Director-General, said: “Cutting the Renewables Obligation scheme early sends a worrying signal about the stability of the UK’s energy policy framework. This is a blow, not just to the industry, and could damage our reputation as a good place to invest in energy infrastructure.

“It is right that an appropriate grace period is put in place to account for projects where significant investments have already been made. The Government must now work closely with industry to get the details right.”

Alan Shanks, head of energy at HBJ Gateley said: “More detail on the parameters of the grace periods this announcement refers will be required before the impact of the changes can be fully assessed. What these contain will influence the likelihood and scale of legal challenge by the industry here.

“But while changes to the timing and swiftness of the Government’s withdrawal of the Renewables Obligation Certificates (ROCs) is surprising, that it was coming is not.

“The Conservatives warned the industry before the election that it would expedite the closing down of the current subsidy regime which is being replaced by Contracts for Difference (CFDs). These are presented as a more sustainable and proportionate market support mechanism. The only difference this announcement makes is to move that closing date one year forward to April 2016.

“Subsidies are always temporary in nature and are typically withdrawn when a market matures and is able to operate effectively. In this case, it is hoped that the grace periods will be designed so that a significant number of projects that would previously have qualified for ROCs will still be able to be delivered.”

David Bell, director of planning at JLL said: “The early closure of the Renewables Obligation is bitterly disappointing news for the UK’s renewable industry. The UK renewables market has always been seen as an attractive investment prospect to the government’s historic support.

“However, this controversial move is likely to damage investor confidence irreparably. It’s not just investment that will bear the brunt of this decision. The latest report from the European Commission has projected that the UK is set to fall short of its legally binding 2020 EU renewable energy targets. Early closure of the RO is likely to further hamper the UK’s efforts to meet these targets.

“The decision also flies in the face of Westminster’s commitment to support only the most cost effective technologies and those that have public support. We know that onshore wind is the most cost effective renewable technology and, as evidenced by the UK government’s own public attitude’s tracker, it also enjoys strong public support.

“Today’s simultaneous changes to planning policy in England, stating that developments will only be approved if they are in locations identified in Local or Neighbourhood Plans or if they have community backing, simply underlines the hostile political approach to this land use type by the UK Government. It seems to be a form of ‘planning by local plebiscite’ which is bad news for what is meant to be an objective and fair planning system.”

Perthshire project at risk

The early closure of the renewables obligation scheme threatens more than 100 future jobs at an eco park development in rural Perthshire, as well as £10 million of investment at the site.

Binn Eco Park, a former landfill site, is now home to waste recovery, recycling facilities and an anaerobic digestion plant.

Ambitious plans to develop a business park, food production facilities and a training centre there – creating jobs and driving investment – are currently stymied because the business cannot import the electricity it needs from the national grid.

Instead, Binn must use expensive diesel generators to produce power. The company hopes that the proposal for four wind turbines next to the current site will be determined by planners next month. Without the low-cost, clean energy they will provide, plans for the site will not proceed as expected.

John Ferguson, Head of Strategy, Binn Eco Park, has twice written to the UK Government over plans to close the renewables obligation early.

He said: “”If we cannot solve the problem of our high energy costs, our business cannot grow. The future of Binn Eco Park relies upon renewable energy, and we have written to the UK Government twice setting out our case.

“This isn’t just about construction jobs, it’s about long-term sustainable employment in a rural area, and it’s about cleaning up the carbon emissions from our business.”

Binn is developing the site, two miles south of Abernethy, Perthshire, with renewable energy developer Element Power. The company has already committed more than £10 million to the scheme.